The Activity, Nature and Trend of ICOs in Gibraltar

“In a global environment where funding raised through ICOs is booming, we see that Gibraltar is clearly a major player in terms of pro-ICO regulation, expertise and the number of ICOs in proportion to its size as a jurisdiction.”

Article by Alain Chevee, CEO, Atlantic NeoTechnologies Ltd

Blockchain technology will be able to achieve its full potential once entrepreneurs and companies embrace the technology to deploy it in the real-world economy. The ICO is, in essence, one of the most favoured structures for raising money in the blockchain business, outpacing classic venture capital firms.

It is important to get a global picture of the ICO environment in which Gibraltar operates. ICOs have been booming since 2017 and are highly correlated to cryptocurrency prices. It is interesting to see how the Google trend on the word “ICO” is highly correlated to the price of Bitcoin.

ICO market in the World

Before entering into details, it is worth noting that all information related to ICOs are by nature also “decentralized” and no legitimate or legal entity can claim gathering all data. The data presented are the result of ICO database compilation (Coinmarketcap, ICObench, ICOdata.io) and our own databases.

On a total of approximately 2000 ICOs having realistic available data (hard cap, jurisdiction, token price target…), we can see that the end of year 2017 price surge has triggered a trend in ICO launches, overcoming the “bubble” burst at the beginning of 2018. What is probably more astonishing is the increasing number of ICOs to come during Fall 2018, with close to 500 ICOs in two months.

We have split our dataset in two categories: the first one showing the ICOs that have raised money (closed as of end of July 2018); and the second one shows the ICOs still in fund raising preparation or having planed to launch their ICO in the next 5 months (as of August 2018).

On a worldwide basis, it can be noted that in around 1000 ICOs which effectively raised money, the average amount raised is close to $18 Million with an open ICO period of 2 months (between ICO opening and end). This length does not take into account any pre-ICO fund raising which by nature is non-public. It is interesting to compare this “realized” number with the average ICO expectations ($6 Million for the minimum target and $36 Million for the average maximum target).

Gibraltar moving forward quickly towards crypto economy.

Thanks to its long experience with another famous tech and finance related industry (the gaming industry), during recent months Gibraltar has been able to set up one of the most advanced and complete legal frameworks regulating the growing crypto-industry.

The success of Gibraltar in hosting and regulating this kind of industry represents a really valuable experience when drafting regulation in order to provide a safe place for investors and industry operators in the nascent Distributed Ledger Technology ecosystem.

Gibraltar is already hosting key players in the crypto-related industry such as TokenMarket, a well-known firm and one of the most trusted sources for ICO and cryptocurrency related information and data, and the Gnosis project, which successfully raised $12.5 Million (250 000 ETH) in 10 minutes for the development of a market prediction project.

GBX Grid and GBX-DAX, tools for smooth launching and trading of crypto assets.

One of latest and most successful ICOs in Gibraltar has been the Gibraltar Blockchain Exchange ICO. Originating from the GSE (Gibraltar Stock Exchange), the first licensed exchange in Gibraltar, GBX (Gibraltar Blockchain Exchange) successfully launched its ICO between February 7th and 14th raising more than $27 Million.

The platform could be seen as an entire ecosystem providing a launching and a listing platform for ICOs.

“GBX Grid” is an ICO launch pad allowing a project to list its ICO on the platform to raise funds. Being listed on GBX grid isn’t as simple as it seems. Each project has to be carefully reviewed by a licenced sponsor, providing complete and comprehensive due diligence on the project before submitting it to GBX.

“GBX DAX” is a Digital Asset Exchange, a cryptocurrency exchange where tokens or currencies can be listed whether launched through GBX or not.

The final goal of this ecosystem is probably to facilitate the future link between traditional asset trading and digital assets trading.

Different sectors raising funds in Gibraltar thanks to ICOs.

Several industries are raising funds in Gibraltar.

During the last 12 months we have been able to observe a lot of projects around the world that are linked to exchanges, and Gibraltar is a good illustration of this trend. Indeed, a quarter of Gibraltarian ICOs realized are exchanges. However, there is already a good diversity when looking during the same period at ICOs raising money in the Betting (prediction market) industry, Finance, Energy and Compliance for the last that occurred.

The pipeline of ICOs on “the Rock” is showing even more signs of acceleration and diversification regarding the category of each project.

In a global environment where funding raised through ICO is booming, we see that Gibraltar is clearly a major player in terms of pro-ICO regulation, expertise and the number of ICOs in proportion to its size as a jurisdiction. The key relevant question is now to know whether Gibraltar will stay ahead of the curve in the future when bigger countries clarify their stance on ICO regulation and major banks and other actors enter into play.

The development of an ICO industry is undoubtly an investment for the future of Gibraltar’s economy as the funds raised by ICOs will continue feeding and seeding projects, no matter how the crypto-currency industry evolves meanwhile. Once the ICOs have raised money, they can allocate it progressively without having their equity capital at risk. It is a key difference to the internet bubble, where most tech companies had their equity (thus management) at risk in market downturn.

Since the end of this summer, we have seen a slowdown on the amounts raised through ICOs.

This is probably explained by the general decrease of the cryptocurrencies market value since mid-January 2018 and the poor performance of most of the tokens listed this year. Of course, under such market conditions, few of 2018 ICO’s are performing, but from a Gibraltarian perspective we could cite Holo (HOT) +457% in USD value since its launch in June. Today ranked as the 52nd project by Market Capitalization, it confirms that a project with a great idea, a solid game plan and a gifted team can be successful.

In parallel to this, we observe a paradigm shift with the type of token and the funding structuration.

Investors are less keen to invest in “utility” or “payments” tokens rather than traditional equity in blockchain projects. Investors and the industry (including most of the regulators) are requiring at least a MVP (Minimal Viable Product) and prefer equity (traditional or through security tokens), and solid partnerships agreements, ideally with already well established businesses. This approach leads to 70% of funding raised during the presale (instead of public ICO sale) and through direct equity stakes in the company.

Security tokens (also known as equity tokens) have gained increasing interest in the last months, and we understand that GBX is working hard alongside with Gibraltar’s regulators to contribute to the setting up of the regulations. These will enable them to become one of the first exchanges permitted to trade them.

After the exuberance of 2017 (similar to 1999 Tech bubble), projects are now getting down-to-earth with realistic expectations and tangible earning interests…It should entice long term investors which will support the arrival of blockchain projects into the real economy.